Law Pertaining To Cheque Bouncing.

Through this post I intend to give brief info to the readers about the steps to take in legal remedy under Negotiable Instruments Act while facing a situation where a cheque given to her by someone has bounced.

I sometimes receive query from people about a bounced cheque. What I, earnestly, request all is to immediately send a notice otherwise proceedings under Negotiable Instruments Act before a Magistrate cannot commence. A person has other remedies as well. Like filing a civil suit for recovery for the amount. But the criminal proceedings before a Magistrate are an excellent option for getting the amount recovered faster because of the implications of criminal sentencing.

This post also presumes that the cheque was issued towards a debt or a legally enforceable liability. In other situations, like gifts, donations, present, etc., an offence under Negotiable Instruments Act, 1881 cannot be made out for a bounced cheque. Another important aspect is that a cheque has a shelf-life / validity of only three months from the date of issue–this used to six months earlier.

The timeline is of utmost importance.

For instance, if you deposited a cheque on May 31st and should you come to know on Monday, June 03, that the cheque has bounced for reasons like “insufficient funds” “payment stopped” “refer to drawer” etc., you need to inform the person who issued the cheque.

It is mandatory that you send a demand notice of the amount of the cheque to the person who issued the cheque within 30 days from the day you received the information of the bouncing. Hence, on or before July 02, your notice should have been dispatched to this person.

The notice does not have any prescribed format or a manner of sending. Simply put, the purpose of the notice is to make the person aware that his cheque has bounced and he should pay up. It is not even required to be sent through a lawyer but it is very important that a counsel sends it so that there isn’t anything left out. The notice can become a point of a fierce battle during trial so services of your attorney are surely advisable to make sure the essential elements of the notice are covered.

The notice must contain the following information:

  1. You presented the cheque within its period of validity;
  2. Factum of debt / legally enforceable liability;
  3. Informing about the reason of dishonour of cheque;
  4. Calling upon to pay him the amount due; and
  5. Inform him that you are giving him 15 days to pay or you will initiate actions.

The notice, ideally, should be sent via registered post / speed post along with courier. Proof of service of this notice is very important.

It is paramount that the person should receive the notice. In one of the rulings, Bombay High Court has recently even held that this notice can also be sent via email. It makes the job very easy, provided you have the email id of the person. Once the person receives the notice, he should pay up the amount within 15 days of receiving the notice. If he doesn’t, then the person issuing notice has 30 days to initiate proceedings before a Magistrate.

So in the given example, Lets say that you sent the notice on June 04, next day of receiving the information from your bank. Taking a buffer of three days of a letter reaching, presumably the notice should reach by June 08 maximum. Meaning thereby, on or before June 23, the person should pay the amount due. However, if the amount is not paid before June 23, then definitely by July 22 a complaint before a Magistrate should be filed.

Word of caution: Even a single day’s delay in sending the notice beyond 30 days of receiving information from the bank is fatal. The Magistrates, in rare instances however, condone delay, upon being satisfied of genuineness of delay, in the later 30 days after the 15 days period has passed. Meaning thereby, the notice should definitely go before expiry of 30 days from receiving information of cheque getting bounced. If, however, after the expiry of the 15 days period there is a genuine delay in not filing the complaint before the Magistrate within 30 days, the Magistrate might allow the complaint to proceed.

To make it even simpler, here is the math on this. Day 1 cheque is bounced, from day 2 you have 30 days to dispatch notice–this period is not extendable. From day 31, add 4 days of getting the notice delivered. From day 35 add 15 days of buffer period for the person to pay. From day 50 you have 30 days to file a complaint before the Magistrate.

After the complaint is filed, the process is a separate story altogether. Matters are usually referred to Mediation and the Accused / Respondent in most cases choose not to contest the matter and settle. However, this post is just to guide the reader the steps to take when facing such a situation.

All the best.

20 Comments

Filed under In Accordance With Law

20 responses to “Law Pertaining To Cheque Bouncing.

  1. I could understand this one perfectly. I only hope I never need this!

  2. Raj

    What if registered post or speed post is not received and acknowledged by the cheque issuer? Someone receives or acknowledges on issuer’s behalf. The acknowledgement still holds good. And what if there is no one receive the notice by registered post / speed post at the given address?

  3. You shouls start writing your own books. Though I know all this you have written but the manner in which you have explained is amazing. Keep it up

  4. I every time used to read piece of writing in news papers but now as I am a user of internet so from now I am using net for articles, thanks to web.

  5. HARESH

    sir, if cheque bounce notice is not received by the person and file the case. after that case can b reject / discontinue??

    Thanks…
    Haresh

  6. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Fantastic job.

  7. Rose

    Hi,

    In below site it says , “If it is beyond 30 days period, the delay can be ignored by the court on sufficient cause being shown.” Is this true?

    Then how can the person/cheque receiver demand his compensation?

    http://www.pathlegal.in/ChequeBounce/India/

  8. Javeed

    Hi,

    Can action be initiated against someone, if the cheque date is more than 3 months, and the cheque has not yet been deposited?

    Moreover, does it mean that after a cheque bounces, and beyond the stipulated time to file a case, there is no remedy for the payee for any legal recourse after that?

  9. Shiva Kiran

    could you please mail me the notice format(soft copy) to be issued to cheque Issuer. and also please mention what to fill in the form. do i need attestation from anyone on this?

  10. if a cheque is bounce after 4 months of its date can i file a 138 case against the drawer cheque date is 28-11-2013

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s